David Farrar: Deducting costs is not a tax break

The Herald reports:

Labour's finance spokeswoman Barbara Edmonds has remained highly critical of the government's new tax relief policy which she said would make landlords “tax cut millionaires”.

Under the existing law, introduced by the former Labour Government when the property market was overheating, no interest can be deducted for property bought from March 27, 2021.

This is not a tax break or tax relief in the normal sense of the word. Every business in New Zealand is allowed to deduct the costs of the business from the income of the business to work out taxable income.

Labour changed the law so that people who rent property would not be allowed to deduct interest expense, unlike every other business. It was totally unprincipled.

All National has done is put all businesses back on the same rule which is we tax on net income, not gross income.

This is not like say the film subsidy which is a tax break specifically for films. That is a form of corporate welfare.

Calling this a tax break for landlords is like saying that allowing doctors to deduct the cost of their work computers from their income is a tax break.

David Farrar runs Curia Market Research, a specialist opinion polling and research agency, and the popular Kiwiblog where this article was sourced. He previously worked in the Parliament for eight years, serving two National Party Prime Ministers and three Opposition Leaders.